Item 1. Financial Statements
Item 1. Financial Statements
JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data) September 30, 2023 December 31, 2022
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 389.5 519.3
Trade receivables, net of allowance of $ 77.4 and $ 66.7
1,912.7 2,148.8
Notes and other receivables 393.3 469.5
Reimbursable receivables 2,005.6 2,005.7
Warehouse receivables 705.2 463.2
Short-term contract assets, net of allowance of $ 2.0 and $ 1.9
359.7 359.7
Prepaid and other 612.6 603.5
Total current assets 6,378.6 6,569.7
Property and equipment, net of accumulated depreciation of $ 1,009.6 and $ 960.5
589.4 582.9
Operating lease right-of-use assets 755.3 776.3
Goodwill 4,541.8 4,528.0
Identified intangibles, net of accumulated amortization of $ 532.4 and $ 445.8
803.2 858.5
Investments, including $ 792.8 and $ 794.9 at fair value
865.2 873.8
Long-term receivables 394.4 331.1
Deferred tax assets, net 382.5 379.6
Deferred compensation plan 590.3 517.9
Other 179.8 175.9
Total assets $ 15,480.5 15,593.7
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,074.2 1,236.8
Reimbursable payables 1,469.4 1,579.5
Accrued compensation and benefits 1,338.8 1,749.8
Short-term borrowings 117.6 164.2
Short-term contract liabilities and deferred income 206.5 216.5
Short-term acquisition-related obligations 20.8 23.1
Warehouse facilities 574.9 455.3
Short-term operating lease liabilities 158.5 156.4
Other 464.8 330.5
Total current liabilities 5,425.5 5,912.1
Credit facility, net of debt issuance costs of $ 8.6 and $ 11.2
1,591.4 1,213.8
Long-term debt, net of debt issuance costs of $ 1.1 and $ 1.2
369.5 372.8
Deferred tax liabilities, net 161.0 194.0
Deferred compensation 542.2 492.4
Long-term acquisition-related obligations 57.6 76.3
Long-term operating lease liabilities 764.5 775.8
Other 399.1 407.0
Total liabilities 9,310.8 9,444.2
Redeemable noncontrolling interest 6.8 7.0
Company shareholders' equity:
Common stock, $ 0.01 par value per share, 100,000,000 shares authorized; 52,120,548 and 52,085,968 shares issued; 47,612,205 and 47,507,758 outstanding
0.5 0.5
Additional paid-in capital 2,009.5 2,022.6
Retained earnings 5,624.5 5,590.4
Treasury stock, at cost, 4,508,343 and 4,578,210 shares
( 907.2 ) ( 934.6 )
Shares held in trust ( 11.4 ) ( 9.8 )
Accumulated other comprehensive loss ( 671.4 ) ( 648.2 )
Total Company shareholders’ equity 6,044.5 6,020.9
Noncontrolling interest 118.4 121.6
Total equity 6,162.9 6,142.5
Total liabilities, redeemable noncontrolling interest and equity $ 15,480.5 15,593.7
See accompanying notes to Condensed Consolidated Financial Statements.
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JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions, except share and per share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Revenue $ 5,111.4 5,177.5 $ 14,879.4 15,257.3
Operating expenses:
Compensation and benefits $ 2,434.6 2,496.2 $ 7,104.6 7,461.4
Operating, administrative and other 2,467.0 2,402.0 7,233.1 6,950.6
Depreciation and amortization 59.1 55.7 176.5 165.5
Restructuring and acquisition charges 31.6 21.0 79.1 66.4
Total operating expenses $ 4,992.3 4,974.9 $ 14,593.3 14,643.9
Operating income $ 119.1 202.6 $ 286.1 613.4
Interest expense, net of interest income 37.1 23.2 103.9 49.1
Equity (losses) earnings ( 11.2 ) 0.5 ( 117.3 ) 72.6
Other income 3.0 0.5 1.9 136.0
Income before income taxes and noncontrolling interest 73.8 180.4 66.8 772.9
Income tax provision 14.5 42.3 13.0 155.4
Net income 59.3 138.1 53.8 617.5
Net (loss) income attributable to noncontrolling interest ( 0.4 ) ( 2.1 ) 0.8 137.8
Net income attributable to common shareholders $ 59.7 140.2 $ 53.0 479.7
Basic earnings per common share $ 1.25 2.93 $ 1.11 9.83
Basic weighted average shares outstanding (in 000's) 47,662 47,863 47,655 48,782
Diluted earnings per common share $ 1.23 2.88 $ 1.10 9.65
Diluted weighted average shares outstanding (in 000's) 48,394 48,629 48,317 49,727
Net income attributable to common shareholders $ 59.7 140.2 $ 53.0 479.7
Change in pension liabilities, net of tax — — ( 1.1 ) —
Foreign currency translation adjustments ( 60.0 ) ( 139.1 ) ( 22.1 ) ( 327.6 )
Comprehensive (loss) income attributable to common shareholders $ ( 0.3 ) 1.1 $ 29.8 152.1
See accompanying notes to Condensed Consolidated Financial Statements.
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JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
Company Shareholders' Equity
Common Stock Additional Shares
(in millions, except share and
per share data) (unaudited) Shares Outstanding Amount Paid-In Retained Held in Treasury Total
Capital Earnings Trust Stock AOCI (1)
NCI (2)
Equity
December 31, 2022 47,507,758 $ 0.5 2,022.6 5,590.4 ( 9.8 ) ( 934.6 ) ( 648.2 ) 121.6 $ 6,142.5
Net (loss) income — — — ( 9.2 ) — — — 0.5 ( 8.7 )
Shares issued under stock-based compensation programs 146,727 — ( 60.3 ) ( 14.5 ) — 81.8 — — 7.0
Shares repurchased for payment of taxes on stock-based compensation ( 45,281 ) — 2.3 — — ( 30.7 ) — — ( 28.4 )
Amortization of stock-based compensation — — 16.7 — — — — — 16.7
Foreign currency translation adjustments — — — — — — 26.8 — 26.8
Decrease in amounts attributable to noncontrolling interest — — — — — — — ( 0.7 ) ( 0.7 )
March 31, 2023 47,609,204 $ 0.5 1,981.3 5,566.7 ( 9.8 ) ( 883.5 ) ( 621.4 ) 121.4 $ 6,155.2
Net income (3)
— — — 2.5 — — — 0.6 3.1
Shares issued under stock-based compensation programs 288,834 — ( 2.3 ) ( 1.6 ) — 7.1 — — 3.2
Shares repurchased for payment of taxes on stock-based compensation ( 104,766 ) — — — — 0.1 — — 0.1
Amortization of stock-based compensation — — 36.3 — — — — — 36.3
Shares held in trust — — — — ( 1.8 ) — — — ( 1.8 )
Repurchase of common stock ( 72,322 ) — — — — ( 19.5 ) — — ( 19.5 )
Change in pension liabilities, net of tax — — — — — — ( 1.1 ) — ( 1.1 )
Foreign currency translation adjustments — — — — — — 11.1 — 11.1
Decrease in amounts attributable to noncontrolling interest — — — — — — — ( 1.8 ) ( 1.8 )
June 30, 2023 47,720,950 $ 0.5 2,015.3 5,567.6 ( 11.6 ) ( 895.8 ) ( 611.4 ) 120.2 $ 6,184.8
Net income (loss) (3)
— — — 59.7 — — — ( 0.1 ) 59.6
Shares issued under stock-based compensation programs 67,398 — ( 12.3 ) ( 2.8 ) — 13.8 — — ( 1.3 )
Shares repurchased for payment of taxes on stock-based compensation ( 25,983 ) — — — — ( 5.3 ) — — ( 5.3 )
Amortization of stock-based compensation — — 6.5 — — — — — 6.5
Shares held in trust — — — — 0.2 — — — 0.2
Repurchase of common stock ( 150,160 ) — — — — ( 19.9 ) — — ( 19.9 )
Foreign currency translation adjustments — — — — — — ( 60.0 ) — ( 60.0 )
Decrease in amounts attributable to noncontrolling interest — — — — — — — ( 1.7 ) ( 1.7 )
September 30, 2023 47,612,205 $ 0.5 2,009.5 5,624.5 ( 11.4 ) ( 907.2 ) ( 671.4 ) 118.4 $ 6,162.9
(1) AOCI: Accumulated other comprehensive income (loss)
(2) NCI: Noncontrolling interest
(3) Excludes net (loss) income attributable to redeemable noncontrolling interest of $( 0.3 ) million and $ 0.1 million for the three months ended September 30, 2023 and June 30, 2023.
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JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
Company Shareholders' Equity
Common Stock Additional Shares
(in millions, except share and
per share data) (unaudited) Shares Outstanding Amount Paid-In Retained Held in Treasury Total
Capital Earnings Trust Stock AOCI (1)
NCI (2)
Equity
December 31, 2021 50,024,139 $ 0.5 2,053.7 4,937.6 ( 5.2 ) ( 406.3 ) ( 395.4 ) 228.5 $ 6,413.4
Net income (loss)
— — — 145.6 — — — ( 1.7 ) 143.9
Shares issued under stock-based compensation programs 305,435 — ( 3.6 ) — — 5.5 — — 1.9
Shares repurchased for payment of taxes on stock-based compensation ( 105,295 ) — ( 1.9 ) — — ( 1.9 ) — — ( 3.8 )
Amortization of stock-based compensation — — 18.6 — — — — — 18.6
Shares held in trust — — — — 0.1 — — — 0.1
Repurchase of common stock ( 615,351 ) — — — — ( 150.0 ) — — ( 150.0 )
Foreign currency translation adjustments — — — — — — ( 24.1 ) — ( 24.1 )
Increase in amounts attributable to noncontrolling interest — — — — — — — 15.2 15.2
March 31, 2022 49,608,928 $ 0.5 2,066.8 5,083.2 ( 5.1 ) ( 552.7 ) ( 419.5 ) 242.0 $ 6,415.2
Net income (3)
— — — 193.9 — — — 141.7 335.6
Shares issued under stock-based compensation programs 36,251 — ( 25.4 ) ( 1.7 ) — 42.2 — — 15.1
Shares repurchased for payment of taxes on stock-based compensation ( 6,592 ) — ( 16.5 ) — — ( 16.5 ) — — ( 33.0 )
Amortization of stock-based compensation — — 25.8 — — — — — 25.8
Repurchase of common stock ( 1,397,915 ) — — — — ( 297.7 ) — — ( 297.7 )
Foreign currency translation adjustments — — — — — — ( 164.4 ) — ( 164.4 )
Decrease in amounts attributable to noncontrolling interest — — — — — — — ( 149.9 ) ( 149.9 )
June 30, 2022 48,240,672 $ 0.5 2,050.7 5,275.4 ( 5.1 ) ( 824.7 ) ( 583.9 ) 233.8 $ 6,146.7
Net income (loss) (3)
— — — 140.2 — — — ( 2.0 ) 138.2
Shares issued under stock-based compensation programs 209,110 — ( 23.6 ) — — 40.6 — — 17.0
Shares repurchased for payment of taxes on stock-based compensation ( 85,659 ) — ( 17.9 ) — — ( 17.9 ) — — ( 35.8 )
Amortization of stock-based compensation — — 25.3 — — — — — 25.3
Repurchase of common stock ( 847,549 ) — — — — ( 148.9 ) — — ( 148.9 )
Foreign currency translation adjustments — — — — — — ( 139.1 ) — ( 139.1 )
Decrease in amounts attributable to noncontrolling interest — — — — — — — ( 1.2 ) ( 1.2 )
September 30, 2022 47,516,574 $ 0.5 2,034.5 5,415.6 ( 5.1 ) ( 950.9 ) ( 723.0 ) 230.6 $ 6,002.2
(1) AOCI: Accumulated other comprehensive income (loss)
(2) NCI: Noncontrolling interest
(3) Excludes net loss attributable to redeemable noncontrolling interest of $ 0.1 million for both the three months ended September 30, 2022 and June 30, 2022.
See accompanying notes to Condensed Consolidated Financial Statements.
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JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
(in millions) (unaudited) 2023 2022
Cash flows from operating activities:
Net income $ 53.8 617.5
Reconciliation of net income to net cash used in operating activities:
Depreciation and amortization 176.5 165.5
Equity losses (earnings) 117.3 ( 72.6 )
Net loss (gain) on dispositions 0.5 ( 134.8 )
Distributions of earnings from investments 8.2 14.9
Provision for loss on receivables and other assets 21.7 17.4
Amortization of stock-based compensation 59.5 69.7
Net non-cash mortgage servicing rights and mortgage banking derivative activity 9.5 ( 12.8 )
Accretion of interest and amortization of debt issuance costs 3.1 3.7
Other, net 15.4 4.2
Change in:
Receivables 162.9 ( 49.7 )
Reimbursable receivables and reimbursable payables ( 110.7 ) ( 162.6 )
Prepaid expenses and other assets ( 104.4 ) ( 74.6 )
Deferred tax assets, net ( 36.0 ) 95.0
Accounts payable and accrued liabilities ( 174.5 ) ( 390.7 )
Accrued compensation ( 356.4 ) ( 492.0 )
Net cash used in operating activities ( 153.6 ) ( 401.9 )
Cash flows from investing activities:
Net capital additions – property and equipment ( 137.7 ) ( 136.0 )
Net investment asset activity (less than wholly-owned) — 132.4
Business acquisitions, net of cash acquired ( 13.6 ) ( 5.7 )
Capital contributions to investments ( 86.8 ) ( 142.3 )
Distributions of capital from investments 21.5 19.1
Other, net ( 3.8 ) ( 15.3 )
Net cash used in investing activities ( 220.4 ) ( 147.8 )
Cash flows from financing activities:
Proceeds from borrowings under credit facility 5,969.0 5,756.0
Repayments of borrowings under credit facility ( 5,594.0 ) ( 4,306.0 )
Repayment of senior notes — ( 275.0 )
Net (repayments of) proceeds from short-term borrowings ( 46.4 ) 109.6
Payments of deferred business acquisition obligations and earn-outs ( 22.6 ) ( 10.4 )
Repurchase of common stock ( 39.4 ) ( 596.6 )
Noncontrolling interest distributions, net ( 4.2 ) ( 135.8 )
Other, net ( 31.2 ) ( 41.3 )
Net cash provided by financing activities 231.2 500.5
Effect of currency exchange rate changes on cash, cash equivalents and restricted cash ( 9.6 ) ( 63.6 )
Net change in cash, cash equivalents and restricted cash ( 152.4 ) ( 112.8 )
Cash, cash equivalents and restricted cash, beginning of the period 746.0 841.6
Cash, cash equivalents and restricted cash, end of the period $ 593.6 728.8
Supplemental disclosure of cash flow information:
Restricted cash, beginning of period $ 226.7 247.9
Restricted cash, end of period 204.1 239.4
Cash paid during the period for:
Interest $ 105.6 41.2
Income taxes, net of refunds 126.4 283.7
Operating leases 146.4 137.5
Non-cash activities:
Business acquisitions (including contingent consideration) $ — 5.3
Non-cash consideration received for disposition — 15.8
Deferred business acquisition obligations — 3.1
See accompanying notes to Condensed Consolidated Financial Statements.
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JONES LANG LASALLE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. INTERIM INFORMATION
Readers of this quarterly report should refer to the audited financial statements of Jones Lang LaSalle Incorporated ("JLL," which may also be referred to as "the Company," "we," "us" or "our") for the year ended December 31, 2022, which are included in our 2022 Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission ("SEC") and also available on our website ( www.jll.com ), since we have omitted from this quarterly report certain footnote disclosures which would substantially duplicate those contained in such audited financial statements. You should also refer to the "Summary of Critical Accounting Policies and Estimates" section within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and to Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in our 2022 Annual Report on Form 10-K for further discussion of our significant accounting policies and estimates.
Our Condensed Consolidated Financial Statements as of September 30, 2023, and for the periods ended September 30, 2023 and 2022, are unaudited. In the opinion of management, we have included all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the Condensed Consolidated Financial Statements for these interim periods.
Historically, our quarterly revenue and profits have tended to increase from quarter to quarter as the year progresses. This is the result of a general focus in the real estate industry on completing transactions by calendar year end, while certain expenses are recognized evenly throughout the year. Growth in our Property Management and Workplace Management businesses as well as other annuity-based services has, to an extent, lessened the seasonality in our revenue and profits during the past several years. Within our Markets Advisory and Capital Markets segments, revenue from transaction-based activities is driven by the size and timing of our clients' transactions and can fluctuate significantly from period to period. Our LaSalle Investment Management ("LaSalle") segment generally earns investment-generated performance fees on clients' real estate investment returns when assets are sold, the timing of which is geared toward the benefit of our clients, as well as co-investment equity gains and losses, primarily dependent on underlying valuations.
A significant portion of our compensation and benefits expense is from incentive compensation plans, which we generally accrue throughout the year based on progress toward annual performance targets. This process can result in significant fluctuations in quarterly compensation and benefits expense from period to period. Non-variable operating expenses, which we recognize when incurred during the year, are relatively constant on a quarterly basis.
We provide for the effects of income taxes on interim financial statements based on our estimate of the effective tax rate for the full year, which we base on forecasted income by country and expected enacted tax rates. As required, we adjust for the impact of discrete items in the quarters in which they occur. Changes in the geographic mix of income can impact our estimated effective tax rate.
As a result of the items mentioned above, the results for the periods ended September 30 are not fully indicative of what our results will be for the full fiscal year.
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2. NEW ACCOUNTING STANDARDS
Recently adopted accounting guidance
In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022‑04, Liabilities-Supplier Finance Programs (Subtopic 450-50): Disclosure of Supplier Finance Program Obligations , which requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about their outstanding obligations at the end of the reporting period. The guidance is intended to address requests from stakeholders for information about an entity’s use of supplier finance programs and their effect on the entity’s working capital, liquidity and cash flows. We adopted this guidance effective January 1, 2023, and the adoption did not impact our financial statements and related disclosures.
3. REVENUE RECOGNITION
Capital Markets revenue excluded from the scope of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC Topic 606")
Our mortgage banking and servicing operations, comprised of (i) all Loan Servicing revenue and (ii) activities related to mortgage servicing rights ("MSR" or "MSRs") and loan origination fees (included in Investment Sales, Debt/Equity Advisory and Other), are not considered revenue from contracts with customers, and accordingly are excluded from the scope of ASC Topic 606. Such out-of-scope revenue is presented below.
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 2023 2022
Revenue excluded from scope of ASC Topic 606 $ 68.1 76.1 $ 211.5 222.6
Contract assets and liabilities
Our contract assets, net of allowance, are included in Short-term contract assets and Other assets and our contract liabilities are included in Short-term contract liabilities and deferred income on our Condensed Consolidated Balance Sheets. The majority of contract liabilities are recognized as revenue within 90 days. Such contract assets and liabilities are presented below.
(in millions) September 30, 2023 December 31, 2022
Contract assets, gross $ 427.4 447.0
Contract asset allowance ( 2.2 ) ( 2.3 )
Contract assets, net $ 425.2 444.7
Contract liabilities $ 134.0 151.4
Remaining performance obligations
Remaining performance obligations represent the aggregate transaction price for contracts where our performance obligations have not yet been satisfied. As of September 30, 2023, the aggregate amount of transaction price allocated to remaining performance obligations represented less than 5 % of our total revenue. In accordance with ASC Topic 606, excluded from the aforementioned remaining performance obligations are (i) amounts attributable to contracts expected to be completed within 12 months and (ii) variable consideration for services performed as a series of daily performance obligations, such as facilities management, property management and LaSalle contracts. A significant portion of our customer contracts, which are not expected to be fulfilled within 12 months, are represented by the contracts within these businesses.
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4. BUSINESS SEGMENTS
We manage and report our operations as five global business segments:
(1) Markets Advisory,
(2) Capital Markets,
(3) Work Dynamics,
(4) JLL Technologies and
(5) LaSalle.
Markets Advisory offers a wide range of real estate services, including agency leasing and tenant representation, property management, advisory and consulting services. Capital Markets service offerings include investment sales, debt and equity advisory, value and risk advisory, and loan servicing. Our Work Dynamics business provides a broad suite of integrated services to occupiers of real estate, including facility and project management, as well as portfolio and other services. Our JLL Technologies segment offers software products, solutions and services, while LaSalle provides investment management services on a global basis to institutional investors and high-net-worth individuals.
We allocate all indirect expenses to our segments, other than interest and income taxes, as nearly all expenses incurred benefit one or more of the segments. Allocated expenses primarily consist of corporate functional costs across the globe, which we allocate to the business segments using an expense-specific driver-based methodology.
Adjusted EBITDA does not include (i) Restructuring and acquisition charges, (ii) gain/loss on disposal, (iii) interest on employee loans, net of forgiveness, (iv) net non-cash MSR and mortgage banking derivative activity, (v) Interest expense, net of interest income, (vi) Income tax provision and (vii) Depreciation and amortization, which are otherwise included in Net income on the Condensed Consolidated Statements of Comprehensive Income.
The Chief Operating Decision Maker ("CODM") of JLL measures and evaluates the segment results based on Adjusted EBITDA for purposes of making decisions about allocating resources and assessing performance. Our CODM is not provided with total asset information by segment and accordingly does not measure or allocate resources based on total assets information. Therefore, we have not disclosed asset information by segment.
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Summarized financial information by business segment is as follows.
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 2023 2022
Markets Advisory
Leasing $ 547.7 703.3 $ 1,626.1 2,012.6
Property Management 419.2 377.8 1,229.3 1,126.5
Advisory, Consulting and Other 25.5 30.4 68.8 90.1
Revenue $ 992.4 1,111.5 $ 2,924.2 3,229.2
Depreciation and amortization (1)
$ 15.9 16.6 $ 48.5 50.0
Equity earnings (losses) $ 0.1 ( 0.2 ) $ 0.3 0.7
Adjusted EBITDA $ 85.1 132.1 $ 256.1 377.3
Capital Markets
Investment Sales, Debt/Equity Advisory and Other $ 310.2 465.0 $ 870.3 1,490.8
Value and Risk Advisory 87.5 89.7 256.1 268.7
Loan Servicing 38.1 40.5 114.5 120.8
Revenue $ 435.8 595.2 $ 1,240.9 1,880.3
Depreciation and amortization $ 16.4 15.2 $ 48.5 46.2
Equity earnings $ 0.7 0.7 $ 6.1 2.1
Adjusted EBITDA $ 50.3 83.2 $ 97.0 328.1
Work Dynamics
Workplace Management $ 2,637.1 2,429.1 $ 7,687.7 7,183.5
Project Management 747.0 748.3 2,126.5 2,115.4
Portfolio Services and Other 130.1 112.4 350.8 335.0
Revenue $ 3,514.2 3,289.8 $ 10,165.0 9,633.9
Depreciation and amortization $ 19.7 17.6 $ 58.9 51.1
Equity earnings $ 0.1 0.1 $ 1.3 1.3
Adjusted EBITDA $ 61.6 53.4 $ 143.5 146.2
JLL Technologies
Revenue $ 58.9 56.5 $ 180.9 156.6
Depreciation and amortization $ 3.9 3.7 $ 11.9 11.4
Equity (losses) earnings $ ( 3.0 ) 1.0 $ ( 102.0 ) 64.5
Adjusted EBITDA $ ( 8.7 ) ( 15.3 ) $ ( 127.2 ) ( 14.7 )
LaSalle
Advisory fees $ 102.7 102.6 $ 306.3 302.8
Transaction fees and other 7.4 10.0 22.8 37.4
Incentive fees — 11.9 39.3 17.1
Revenue $ 110.1 124.5 $ 368.4 357.3
Depreciation and amortization $ 2.2 1.6 $ 5.8 4.8
Equity (losses) earnings $ ( 9.1 ) ( 1.1 ) $ ( 23.0 ) 4.0
Adjusted EBITDA $ 16.9 22.8 $ 60.9 71.9
(1) Excludes the noncontrolling interest portion of amortization of acquisition-related intangibles which is not attributable to common shareholders.
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The following table is a reconciliation of Adjusted EBITDA to Net income attributable to common shareholders.
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 2023 2022
Adjusted EBITDA - Markets Advisory $ 85.1 132.1 $ 256.1 377.3
Adjusted EBITDA - Capital Markets 50.3 83.2 97.0 328.1
Adjusted EBITDA - Work Dynamics 61.6 53.4 143.5 146.2
Adjusted EBITDA - JLL Technologies ( 8.7 ) ( 15.3 ) ( 127.2 ) ( 14.7 )
Adjusted EBITDA - LaSalle 16.9 22.8 60.9 71.9
Adjusted EBITDA - Consolidated $ 205.2 276.2 $ 430.3 908.8
Adjustments:
Restructuring and acquisition charges $ ( 31.6 ) ( 21.0 ) $ ( 79.1 ) ( 66.4 )
Net gain (loss) on disposition 1.3 — ( 0.5 ) ( 7.5 )
Interest on employee loans, net of forgiveness 1.6 — 2.3 —
Net non-cash MSR and mortgage banking derivative activity ( 7.1 ) 5.2 ( 9.5 ) 12.8
Interest expense, net of interest income ( 37.1 ) ( 23.2 ) ( 103.9 ) ( 49.1 )
Income tax provision ( 14.5 ) ( 42.3 ) ( 13.0 ) ( 155.4 )
Depreciation and amortization (1)
( 58.1 ) ( 54.7 ) ( 173.6 ) ( 163.5 )
Net income attributable to common shareholders $ 59.7 140.2 $ 53.0 479.7
(1) This adjustment excludes the noncontrolling interest portion of amortization of acquisition-related intangibles which is not attributable to common shareholders.
5. BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
2023 Business Combinations Activity
During the nine months ended September 30, 2023, we completed one strategic acquisition. This strategic acquisition is presented below.
Acquired Company Quarter of Acquisition Country Primary Segment
Kensington Capital Advisors (KCA) Q2 United States Capital Markets
Aggregate terms of our acquisition included: (1) cash paid at closing of $ 13.6 million and (2) prior 50.0% ownership previously accounted for as an equity method investment which had a fair value of $ 10.0 million.
A preliminary allocation of purchase consideration resulted in goodwill of $ 18.7 million, identifiable intangibles of $ 2.1 million and other net assets (acquired assets less assumed liabilities) of $ 2.8 million. As of September 30, 2023, we have not completed our analysis to assign fair values to all of the identifiable intangible and tangible assets acquired and, therefore, we may further refine the purchase price allocations for this acquisition during the open measurement period.
During the nine months ended September 30, 2023, we paid $ 22.8 million for deferred business acquisition and earn-out obligations for acquisitions completed in prior years.
2022 Business Combinations Activity
During the nine months ended September 30, 2022, we completed no strategic acquisitions.
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Earn-Out Payments
($ in millions) September 30, 2023 December 31, 2022
Number of acquisitions with earn-out payments subject to the achievement of certain performance criteria 16 17
Maximum earn-out payments (undiscounted) $ 103.8 114.6
Short-term earn-out liabilities (fair value) (1)
13.4 5.0
Long-term earn-out liabilities (fair value) (1)
50.8 68.3
(1) Included in Short-term and Long-term acquisition-related obligations on the Condensed Consolidated Balance Sheets.
Assuming the achievement of the applicable performance criteria, we anticipate making these earn-out payments over the next five years. Refer to Note 8, Fair Value Measurements, and Note 11, Restructuring and Acquisition Charges, for additional discussion of our earn-out liabilities.
Goodwill and Other Intangible Assets
Goodwill and unamortized intangibles as of September 30, 2023 consisted of: (1) goodwill of $ 4,541.8 million, (2) identifiable intangibles of $ 803.2 million amortized over their remaining finite useful lives and (3) $ 47.8 million of identifiable intangibles with indefinite useful lives that are not amortized. Notable portions of our goodwill and unamortized intangibles are denominated in currencies other than the U.S. dollar, which means a portion of the movements in the reported book value of these balances is attributable to movements in foreign currency exchange rates.
The following table details, by reporting segment, movements in goodwill.
(in millions) Markets Advisory Capital Markets Work Dynamics JLL Technologies LaSalle Consolidated
Balance as of December 31, 2022 $ 1,742.9 1,949.2 532.6 247.7 55.6 $ 4,528.0
Additions, net of adjustments — 18.7 — — — 18.7
Dispositions ( 0.4 ) ( 0.2 ) — — — ( 0.6 )
Impact of exchange rate movements ( 1.7 ) ( 2.0 ) ( 0.5 ) ( 0.1 ) — ( 4.3 )
Balance as of September 30, 2023 $ 1,740.8 1,965.7 532.1 247.6 55.6 $ 4,541.8
(in millions) Markets Advisory Capital Markets Work Dynamics JLL Technologies LaSalle Consolidated
Balance as of January 1, 2022 $ 1,782.9 1,983.9 539.9 247.5 57.4 $ 4,611.6
Additions, net of adjustments — 8.5 4.6 0.4 — 13.5
Impact of exchange rate movements ( 69.8 ) ( 76.4 ) ( 20.8 ) ( 0.2 ) ( 3.1 ) ( 170.3 )
Balance as of September 30, 2022 $ 1,713.1 1,916.0 523.7 247.7 54.3 $ 4,454.8
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The following tables detail, by intangible type, movements in the gross carrying amount and accumulated amortization of our identifiable intangibles.
(in millions) MSRs Other Intangibles Consolidated
Gross Carrying Amount
Balance as of December 31, 2022 $ 747.3 557.0 $ 1,304.3
Additions, net of adjustments (1)
72.5 5.8 78.3
Adjustment for fully amortized intangibles ( 25.7 ) ( 20.3 ) ( 46.0 )
Impact of exchange rate movements — ( 1.0 ) ( 1.0 )
Balance as of September 30, 2023 $ 794.1 541.5 $ 1,335.6
Accumulated Amortization
Balance as of December 31, 2022 $ ( 242.2 ) ( 203.6 ) $ ( 445.8 )
Amortization, net (2)
( 80.1 ) ( 52.8 ) ( 132.9 )
Adjustment for fully amortized intangibles 25.7 20.3 46.0
Impact of exchange rate movements — 0.3 0.3
Balance as of September 30, 2023 $ ( 296.6 ) ( 235.8 ) $ ( 532.4 )
Net book value as of September 30, 2023 $ 497.5 305.7 $ 803.2
(1) Included in this amount for MSRs was $ 8.4 million relating to prepayments/write-offs due to prepayments of the underlying obligation for which we assumed, acquired or retained the servicing rights.
(2) Amortization of MSRs is included in Revenue within the Condensed Consolidated Statements of Comprehensive Income.
(in millions) MSRs Other Intangibles Total
Gross Carrying Amount
Balance as of December 31, 2021 $ 669.7 557.4 $ 1,227.1
Additions, net of adjustments (1)
103.3 19.1 122.4
Adjustment for fully amortized intangibles ( 47.9 ) ( 2.7 ) ( 50.6 )
Impact of exchange rate movements — ( 13.7 ) ( 13.7 )
Balance as of September 30, 2022 $ 725.1 560.1 $ 1,285.2
Accumulated Amortization
Balance as of December 31, 2021 $ ( 191.0 ) ( 149.1 ) $ ( 340.1 )
Amortization, net (2)
( 86.7 ) ( 51.5 ) ( 138.2 )
Adjustment for fully amortized intangibles 47.9 2.7 50.6
Impact of exchange rate movements — 4.1 4.1
Balance as of September 30, 2022 $ ( 229.8 ) ( 193.8 ) $ ( 423.6 )
Net book value as of September 30, 2022 $ 495.3 366.3 $ 861.6
(1) Included in this amount for MSRs was $ 22.5 million relating to prepayments/write-offs due to prepayments of the underlying obligation for which we assumed, acquired or retained the servicing rights.
(2) Amortization of MSRs is included in Revenue within the Condensed Consolidated Statements of Comprehensive Income.
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6. INVESTMENTS
Summarized investment balances as of September 30, 2023 and December 31, 2022 are presented in the following table.
(in millions) September 30, 2023 December 31, 2022
JLL Technologies investments $ 469.3 483.4
LaSalle co-investments 368.3 366.5
Other investments 27.6 23.9
Total $ 865.2 873.8
Our JLL Technologies investments are, generally, investments in early to mid-stage proptech companies as well as proptech funds, while our LaSalle co-investments are, primarily, direct investments in 49 separate property or commingled funds, where we co-invest alongside our clients and for which we also have an advisory agreement.
We have maximum potential unfunded commitments to direct investments or investment vehicles of $ 361.9 million and $ 14.2 million as of September 30, 2023 for our LaSalle Investment Management business and JLL Technologies, respectively. Of the $ 361.9 million related to LaSalle, while we remain contractually obligated, we do not expect a call on the $ 60.3 million relating to a specific investment since the underlying fund moved into its liquidation phase in January 2020.
We evaluate our less-than-wholly-owned investments to determine whether the underlying entities are classified as variable interest entities ("VIEs"); we assess each identified VIE to determine whether we are the primary beneficiary. In prior periods, we determined we were the primary beneficiary of certain VIEs and, accordingly, we consolidated such entities. In December of 2022, as a result of a reconsideration event, we concluded we were no longer the primary beneficiary of these VIEs and, therefore, no longer consolidate these VIEs.
Summarized financial information for our consolidated VIEs is presented in the following table. As a result of the reconsideration event described above, there were no consolidated VIE balances as of September 30, 2023 and December 31, 2022; net income was consolidated up to the reconsideration date.
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 2023 2022
Revenue $ — 4.6 $ — 13.2
Operating and other expenses — ( 6.2 ) — ( 17.9 )
Net gains on sale of investments (1)
— — — 142.3
Net (loss) income $ — ( 1.6 ) $ — 137.6
(1) The gain was included in Other income on the Condensed Consolidated Statements of Comprehensive Income.
We allocated the net (loss) income of the consolidated VIEs to the noncontrolling interest holders as Net (loss) income attributable to noncontrolling interest in our Condensed Consolidated Statements of Comprehensive Income.
Impairment
There were no significant other-than-temporary impairment charges on investments for the nine months ended September 30, 2023 and 2022.
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Fair Value
We report a majority of our investments at fair value. For such investments, we increase or decrease our investment each reporting period by the change in the fair value and we report these fair value adjustments in our Condensed Consolidated Statements of Comprehensive Income within Equity (losses) earnings. The table below shows the movement in our investments reported at fair value.
(in millions) 2023 2022
Fair value investments as of January 1, $ 794.9 639.6
Investments (1)
141.1 140.3
Distributions ( 20.2 ) ( 29.9 )
Change in fair value, net ( 121.8 ) 65.2
Foreign currency translation adjustments, net ( 1.2 ) ( 28.5 )
Fair value investments as of September 30, $ 792.8 786.7
(1) In 2023, $66.9 million in Notes receivable matured and (inclusive of accrued interest) converted to equity.
See Note 8, Fair Value Measurements, for additional discussion of our investments reported at fair value.
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7. STOCK-BASED COMPENSATION
Stock Unit Awards
Restricted stock unit ("RSU") and performance stock unit ("PSU") awards activity is presented in the following tables.
RSU Shares
(in 000's) PSU Shares
(in 000's) Total Shares
(in 000's) Weighted Average
Grant Date
Fair Value Weighted Average
Remaining
Contractual Life
(in years)
Unvested as of June 30, 2023
1,003.4 463.6 1,467.0 $ 174.54 1.85
Granted 175.3 2.4 177.7 165.96
Vested ( 66.4 ) — ( 66.4 ) 145.97
Forfeited ( 39.6 ) ( 4.2 ) ( 43.8 ) 176.43
Unvested as of September 30, 2023
1,072.7 461.8 1,534.5 $ 174.73 1.78
Unvested as of June 30, 2022
939.0 576.9 1,515.9 $ 167.23 1.98
Granted 59.9 1.6 61.5 172.22
Vested ( 203.7 ) — ( 203.7 ) 141.15
Forfeited ( 10.2 ) ( 10.6 ) ( 20.8 ) 158.85
Unvested as of September 30, 2022
785.0 567.9 1,352.9 $ 171.51 1.85
RSU Shares
(in 000's) PSU Shares
(in 000's) Total Shares
(in 000's) Weighted Average
Grant Date
Fair Value Weighted Average
Remaining
Contractual Life
(in years)
Unvested as of December 31, 2022
841.3 567.0 1,408.3 $ 170.78 1.79
Granted 520.5 185.2 705.7 143.64
Vested ( 227.1 ) ( 257.2 ) ( 484.3 ) 120.53
Forfeited ( 62.0 ) ( 33.2 ) ( 95.2 ) 161.55
Unvested as of September 30, 2023
1,072.7 461.8 1,534.5 $ 174.73 1.78
Unvested as of December 31, 2021
912.4 646.0 1,558.4 $ 152.27 1.99
Granted 248.4 114.6 363.0 214.90
Vested ( 355.1 ) ( 175.1 ) ( 530.2 ) 145.10
Forfeited ( 20.7 ) ( 17.6 ) ( 38.3 ) 165.51
Unvested as of September 30, 2022
785.0 567.9 1,352.9 $ 171.51 1.85
As of September 30, 2023, we had $ 99.4 million of unamortized deferred compensation related to unvested RSUs and PSUs, which we anticipate recognizing over varying periods into 2027.
For the three and nine months ended September 30, 2023, we recorded $ 13.5 million of stock-based compensation expense reversal associated with the expected achievement against performance measures of certain PSU awards.
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8. FAIR VALUE MEASUREMENTS
We measure certain assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures , which defines fair value as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants on the measurement date. In addition, it establishes a framework for measuring fair value according to the following three-tier fair value hierarchy:
• Level 1 - Quoted prices for identical assets or liabilities in active markets accessible as of the measurement date;
• Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
• Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Financial Instruments
Our financial instruments include Cash and cash equivalents, Trade receivables, Notes and other receivables, Reimbursable receivables, Warehouse receivables, restricted cash, contract assets, Accounts payable, Reimbursable payables, Short-term borrowings, contract liabilities, Warehouse facilities, Credit facility, Long-term debt and foreign currency forward contracts. The carrying amounts of Cash and cash equivalents, Trade receivables, Notes and other receivables, Reimbursable receivables, restricted cash, contract assets, Accounts payable, Reimbursable payables, contract liabilities and the Warehouse facilities approximate their estimated fair values due to the short-term nature of these instruments. The carrying values of our Credit facility and Short-term borrowings approximate their estimated fair values given the variable interest rate terms and market spreads.
We estimated the fair value of our Long-term debt using dealer quotes that are Level 2 inputs in the fair value hierarchy. The fair value and carrying value of our debt are presented in the following table.
(in millions) September 30, 2023 December 31, 2022
Long-term debt, fair value $ 357.8 360.9
Long-term debt, carrying value, net of debt issuance costs 369.5 372.8
Investments at Fair Value - Net Asset Value ("NAV")
We report a significant portion of our investments at fair value. For such investments, we increase or decrease our investment each reporting period by the change in the fair value, and we report these fair value adjustments in our Condensed Consolidated Statements of Comprehensive Income within Equity (losses) earnings.
For a subset of our investments reported at fair value, we estimate the fair value using the NAV per share (or its equivalent) our investees provide. Critical inputs to NAV estimates included valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates, and asset-specific market borrowing rates. We did not consider any adjustments to NAV estimates provided by investees, including adjustments for any restrictions to the transferability of ownership interests embedded within investment agreements to which we are a party, to be necessary based upon (i) our understanding of the methodology utilized and inputs incorporated to estimate NAV at the investee level, (ii) consideration of market demand for the specific types of real estate assets held by each venture and (iii) contemplation of real estate and capital markets conditions in the localities in which these ventures operate. As of September 30, 2023 and December 31, 2022, investments at fair value using NAV were $ 307.8 million and $ 284.6 million, respectively. As these investments are not required to be classified in the fair value hierarchy, they have been excluded from the following table.
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Recurring Fair Value Measurements
The following table categorizes by level in the fair value hierarchy the estimated fair value of our assets and liabilities measured at fair value on a recurring basis.
September 30, 2023 December 31, 2022
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Investments - fair value $ 46.3 — 438.7 58.3 — 452.0
Foreign currency forward contracts receivable — 3.3 — — 3.7 —
Warehouse receivables — 705.2 — — 463.2 —
Deferred compensation plan assets — 590.3 — — 517.9 —
Mortgage banking derivative assets — — 214.1 — — 190.2
Total assets at fair value $ 46.3 1,298.8 652.8 58.3 984.8 642.2
Liabilities
Foreign currency forward contracts payable $ — 8.3 — — 4.8 —
Deferred compensation plan liabilities — 540.4 — — 485.4 —
Earn-out liabilities — — 64.2 — — 73.2
Mortgage banking derivative liabilities — — 183.2 — — 169.5
Total liabilities at fair value $ — 548.7 247.4 — 490.2 242.7
Investments
We classify one investment as Level 1 in the fair value hierarchy as a quoted price is readily available. We increase or decrease our investment each reporting period by the change in the fair value of the investment. We report the fair value adjustments in our Condensed Consolidated Statements of Comprehensive Income within Equity (losses) earnings.
Investments classified as Level 3 in the fair value hierarchy represent investments in early to mid-stage non-public entities where we elected the fair value option. To the extent there are changes in fair value, we recognize such changes through Equity (losses) earnings. Such changes are generally the result of pricing in subsequent funding rounds, changes in business strategy or performance updates from the investee. For most of our investments, the carrying value was deemed to approximate fair value due to the proximity of the investment date, or date of most recent financing raise, to the balance sheet date, as well as consideration of investee-level performance updates.
Foreign Currency Forward Contracts
We regularly use foreign currency forward contracts to manage our currency exchange rate risk related to intercompany lending and cash management practices. We determine the fair values of these contracts based on current market rates. The inputs for these valuations are Level 2 inputs in the fair value hierarchy. The following table details the gross notional value and net basis of these contracts.
(in billions) September 30, 2023 December 31, 2022
Foreign currency forward contracts, gross notional value $ 1.73 1.81
Foreign currency forward contracts, net basis 1.19 1.02
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We record the asset and liability positions for our foreign currency forward contracts based on the net payable or net receivable position with the financial institutions from which we purchase these contracts. The outstanding balances of these contracts are presented in the following table.
(in millions) September 30, 2023 December 31, 2022
Net asset, receivable positions $ 3.4 7.7
Net asset, payable positions ( 0.1 ) ( 4.0 )
Foreign currency forward contracts receivable $ 3.3 3.7
Net liability, receivable positions $ ( 1.4 ) ( 1.6 )
Net liability, payable positions 9.7 6.4
Foreign currency forward contracts payable $ 8.3 4.8
Warehouse Receivables
As of September 30, 2023 and December 31, 2022, all of our Warehouse receivables were under commitment to be purchased by government-sponsored enterprises ("GSEs") or by a qualifying investor as part of a U.S. government or GSE mortgage-backed security program.
Deferred Compensation
We maintain a deferred compensation plan for certain of our U.S. employees that allows them to defer portions of their compensation. We recorded this plan on our Condensed Consolidated Balance Sheet as Deferred compensation plan assets, long-term deferred compensation plan liabilities, included in Deferred compensation, and as a reduction of equity, Shares held in trust. The components of the plan are presented in the following table.
(in millions) September 30, 2023 December 31, 2022
Deferred compensation plan assets $ 590.3 517.9
Long-term deferred compensation plan liabilities 540.4 485.4
Shares held in trust 11.4 9.8
Earn-Out Liabilities
We classify our Earn-out liabilities within Level 3 in the fair value hierarchy because the inputs we use to develop the estimated fair value include unobservable inputs. See Note 5, Business Combinations, Goodwill and Other Intangible Assets, for additional discussion of our Earn-out liabilities.
Mortgage Banking Derivatives
Both our interest rate lock commitments to prospective borrowers and forward sale contracts with prospective investors are undesignated derivatives and considered Level 3 valuations due to significant unobservable inputs related to counterparty credit risk. An increase in counterparty credit risk assumptions would result in a lower fair value measurement.
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The tables below present a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
(in millions) Balance as of June 30, 2023 Net change in fair value Foreign CTA (1)
Purchases / Additions Settlements Transfers in (2)
Balance as of
September 30, 2023
Investments $ 438.1 ( 2.0 ) ( 1.0 ) 0.5 — 3.1 $ 438.7
Mortgage banking derivative assets and liabilities, net 59.1 18.0 — 25.3 ( 71.5 ) — 30.9
Earn-out liabilities 64.3 0.1 ( 0.1 ) — ( 0.1 ) — 64.2
(in millions) Balance as of June 30, 2022 Net change in fair value Foreign CTA (1)
Purchases / Additions Settlements Transfers out Balance as of September 30, 2022
Investments $ 460.4 2.5 — 1.8 — ( 11.2 ) $ 453.5
Mortgage banking derivative assets and liabilities, net 21.6 34.1 — 33.6 ( 29.0 ) — 60.3
Earn-out liabilities 74.9 ( 0.1 ) ( 0.3 ) 3.3 ( 1.2 ) — 76.6
(in millions) Balance as of December 31, 2022 Net change in fair value Foreign CTA (1)
Purchases / Additions Settlements Transfers in (2)
Balance as of
September 30, 2023
Investments $ 452.0 ( 101.0 ) 0.2 20.6 — 66.9 $ 438.7
Mortgage banking derivative assets and liabilities, net 20.7 56.9 — 93.8 ( 140.5 ) — 30.9
Earn-out liabilities 73.2 ( 0.5 ) 0.1 — ( 8.6 ) — 64.2
(in millions) Balance as of December 31, 2021 Net change in fair value Foreign CTA (1)
Purchases / Additions Settlements Transfers out Balance as of September 30, 2022
Investments $ 303.5 65.0 — 96.2 — ( 11.2 ) $ 453.5
Mortgage banking derivative assets and liabilities, net 21.9 56.7 — 119.6 ( 137.9 ) — 60.3
Earn-out liabilities 84.1 0.2 ( 0.7 ) 5.3 ( 12.3 ) — 76.6
(1) CTA: Currency translation adjustments
(2) Notes receivable (inclusive of accrued interest) converted to equity upon maturity and was classified as a Level 3 investment immediately.
Net change in fair value, included in the tables above, is reported in Net income as follows.
Category of Assets/Liabilities using Unobservable Inputs Condensed Consolidated Statements
of Comprehensive Income Account Caption
Earn-out liabilities (Short-term and Long-term) Restructuring and acquisition charges
Investments Equity (losses) earnings
Other current assets - Mortgage banking derivative assets Revenue
Other current liabilities - Mortgage banking derivative liabilities Revenue
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Non-Recurring Fair Value Measurements
We review our investments, except those investments otherwise reported at fair value, on a quarterly basis, or as otherwise deemed necessary, for indications of whether we may be unable to recover the carrying value of our investments and whether such investments are other than temporarily impaired. When the carrying amount of the investment is in excess of the estimated future undiscounted cash flows, we use a discounted cash flow approach or other acceptable method to determine the fair value of the investment in computing the amount of the impairment. Our determination of fair value primarily relies on Level 3 inputs. We did not recognize any significant investment-level impairment losses during either of the nine months ended September 30, 2023 or 2022. See Note 6, Investments, for additional information, including information related to impairment charges recorded at the investee level.
9. DEBT
Debt is composed of the following obligations.
($ in millions) September 30, 2023 December 31, 2022
Local overdraft facilities $ 15.2 21.2
Other short-term borrowings 102.4 143.0
Short-term borrowings $ 117.6 164.2
Credit facility, net of debt issuance costs of $ 8.6 and $ 11.2
1,591.4 1,213.8
Long-term senior notes, 1.96 %, face amount of € 175.0 , due June 2027, net of debt issuance costs of $ 0.5 and $ 0.5
184.8 186.5
Long-term senior notes, 2.21 %, face amount of € 175.0 , due June 2029, net of debt issuance costs of $ 0.6 and $ 0.7
184.7 186.3
Total debt $ 2,078.5 1,750.8
Credit Facilities
We have a $ 3.35 billion unsecured revolving credit facility (the "Facility") that matures on April 14, 2026. Pricing on the Facility ranges from Adjusted Term Secured Overnight Financing Rate ("SOFR") plus 0.875% to 1.35% , with pricing as of September 30, 2023 at Adjusted Term SOFR plus 0.98 %. In addition to outstanding borrowings under the Facility presented in the above table, we had outstanding letters of credit under the Facility of $ 0.4 million as of both September 30, 2023 and December 31, 2022.
In addition, we have an uncommitted credit agreement (the "Uncommitted Facility"), which allows for discretionary short-term liquidity of up to $ 400.0 million. Interest and fees are set at the time of utilization and calculated on a 360-day basis. Between quarter-end dates, we intend to use the proceeds to reduce indebtedness under the Facility at a lower interest rate. As such, the Uncommitted Facility had no outstanding balance as of both September 30, 2023 and December 31, 2022.
The following table provides additional information on our Facility and Uncommitted Facility, collectively.
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions) 2023 2022 2023 2022
Average outstanding borrowings $ 2,011.9 1,599.8 $ 2,017.0 1,295.9
Average effective interest rate 6.1 % 3.2 % 5.8 % 2.2 %
We will continue to use the Facility for, but not limited to, business acquisitions, working capital needs (including payment of accrued incentive compensation), co-investment activities, share repurchases and capital expenditures.
Short-Term and Long-Term Debt
In addition to our credit facilities, we have the capacity to borrow up to an additional $ 52.9 million under local overdraft facilities. Amounts outstanding are presented in the debt table above.
As of September 30, 2023, our issuer and senior unsecured ratings are investment grade: Baa1 from Moody’s Investors Service, Inc. and BBB+ from Standard & Poor’s Ratings Services.
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Covenants
Our Facility and senior notes are subject to customary financial and other covenants, including cash interest coverage ratios and leverage ratios, as well as event of default conditions. We remained in compliance with all covenants as of September 30, 2023.
Warehouse Facilities
September 30, 2023 December 31, 2022
($ in millions) Outstanding Balance Maximum Capacity Outstanding Balance Maximum Capacity
Warehouse facilities:
BSBY (1) plus 1.30% , expires September 16, 2024 (2)
$ 174.9 700.0 215.7 700.0
SOFR plus 1.30% , expires September 14, 2024 (3)
381.4 1,200.0 132.3 1,200.0
SOFR plus 1.40% , expires July 26, 2024 (4)
— 400.0 9.0 400.0
Fannie Mae ASAP (5) program, SOFR plus 1.25%
19.9 n/a 99.2 n/a
Gross warehouse facilities 576.2 2,300.0 456.2 2,300.0
Debt issuance costs ( 1.3 ) n/a ( 0.9 ) n/a
Total warehouse facilities $ 574.9 2,300.0 455.3 2,300.0
(1) Bloomberg Short-Term Bank Yield Index rate ("BSBY")
(2) In the third quarter of 2023, JLL extended the Warehouse facility; previously, the facility had a maturity date of September 18, 2023.
(3) In the third quarter of 2023, JLL extended the Warehouse facility; previously, the facility had a maturity date of September 15, 2023.
(4) In the third quarter of 2023, JLL extended the Warehouse facility; previously, the facility had a maturity date of July 28, 2023.
(5) As Soon As Pooled ("ASAP") funding program.
We have lines of credit established for the sole purpose of funding our Warehouse receivables. These lines of credit exist with financial institutions and are secured by the related warehouse receivables. Pursuant to these facilities, we are required to comply with certain financial covenants regarding (i) minimum net worth, (ii) minimum servicing-related loans and (iii) minimum adjusted leverage ratios. We remained in compliance with all covenants under our facilities as of September 30, 2023.
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10. COMMITMENTS AND CONTINGENCIES
We are a defendant in various litigation matters arising in the ordinary course of business, some of which involve claims for damages that are substantial in amount.
Professional Indemnity Insurance
In order to better manage our global insurance program and support our risk management efforts, we supplement our traditional insurance coverage for certain types of claims by using a wholly-owned captive insurance company. The level of risk retained by our captive insurance company, with respect to professional indemnity claims, is up to $ 10.0 million per claim, inclusive of the deductible. We contract third-party insurance companies to provide coverage of risk in excess of this amount. When a potential loss event occurs, we estimate the ultimate cost of the claim and accrue the amount in Other current and long-term liabilities on our Condensed Consolidated Balance Sheets when probable and estimable. In addition, we have established receivables from third-party insurance providers for claim amounts in excess of the risk retained by our captive insurance company. As of September 30, 2023 and December 31, 2022, these receivables were $ 2.2 million and $ 22.5 million, respectively, and are included in Notes and other receivables on our Condensed Consolidated Balance Sheets.
The following table shows the professional indemnity accrual activity and related payments.
(in millions)
December 31, 2022 $ 2.2
New claims 0.6
Prior year claims adjustments (including foreign currency changes) 5.2
Claims paid ( 2.3 )
September 30, 2023 $ 5.7
December 31, 2021 $ 1.2
New claims —
Prior year claims adjustments (including foreign currency changes) ( 0.1 )
Claims paid ( 0.2 )
September 30, 2022 $ 0.9
Delegated Underwriting and Servicing ("DUS") Program Loan Loss-Sharing
As a participant in the DUS program, we retain a portion of the risk of loss for loans that are originated and sold under the DUS program. Net losses on defaulted loans are shared with Fannie Mae based upon established loss-sharing ratios. Generally, we share approximately one-third of incurred losses, subject to a cap of 20% of the principal balance of the mortgage at origination. As of September 30, 2023 and December 31, 2022, we had loans, funded and sold, subject to such loss-sharing arrangements with an aggregate unpaid principal balance of $ 20.5 billion and $ 18.3 billion, respectively.
For all DUS program loans with loss-sharing obligations, we record a non-contingent liability equal to the estimated fair value of the guarantee obligations undertaken upon sale of the loan, which reduces our gain on sale of the loan. Subsequently, this liability is amortized over the estimated life of the loan and recognized as Revenue on the Condensed Consolidated Statements of Comprehensive Income. As of September 30, 2023 and December 31, 2022, the loss-sharing guarantee obligations were $ 31.1 million and $ 29.0 million, respectively, and are included in Other liabilities on our Condensed Consolidated Balance Sheets. There were no loan losses incurred during the nine months ended September 30, 2023 and 2022.
The loss-sharing aspect of the program represents an off-balance sheet credit exposure. We record a separate contingent reserve for this risk calculated on an individual loan level. The loan loss guarantee reserve was $ 24.8 million as of both September 30, 2023 and December 31, 2022, and is included within Other liabilities on our Condensed Consolidated Balance Sheets.
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11. RESTRUCTURING AND ACQUISITION CHARGES
Restructuring and acquisition charges include cash and non-cash expenses. Cash-based charges primarily consist of (i) severance and employment-related charges, including those related to external service providers, incurred in conjunction with a structural business shift, which can be represented by a notable change in headcount, change in leadership, or transformation of business processes, (ii) acquisition, transaction and integration-related charges and (iii) other restructuring including lease exit charges. Non-cash charges include (i) stock-based compensation expense for retention awards issued in conjunction with prior-period acquisitions and (ii) fair value adjustments to earn-out liabilities relating to prior-period acquisition activity. Restructuring and acquisition charges are presented in the table below.
Three Months Ended September 30, Nine Months Ended September 30,
(in millions) 2023 2022 2023 2022
Severance and other employment-related charges $ 16.4 9.4 $ 47.9 21.0
Restructuring, pre-acquisition and post-acquisition charges 15.5 11.4 28.8 39.5
Stock-based compensation expense for post-acquisition retention awards (1)
( 0.4 ) 0.3 2.9 5.7
Fair value adjustments to earn-out liabilities 0.1 ( 0.1 ) ( 0.5 ) 0.2
Restructuring and acquisition charges $ 31.6 21.0 $ 79.1 66.4
(1) Includes the impact of shares forfeited during the third quarter.
We expect nearly all expenses related to (i) severance and other employment-related charges and (ii) restructuring, pre-acquisition and post-acquisition charges as of September 30, 2023 will be paid during the next twelve months.
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12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT
The tables below present the changes in Accumulated other comprehensive income (loss) ("AOCI") by component.
(in millions) Pension and postretirement benefit Cumulative foreign currency translation adjustment Total
Balance as of June 30, 2023 $ ( 65.3 ) ( 546.1 ) $ ( 611.4 )
Other comprehensive loss before reclassification — ( 60.0 ) ( 60.0 )
Amounts reclassified from AOCI after tax expense of
$ -, $ - and $ -
— — —
Other comprehensive loss after tax expense of $ - , $ - and $ - — ( 60.0 ) ( 60.0 )
Balance as of September 30, 2023 $ ( 65.3 ) ( 606.1 ) $ ( 671.4 )
(in millions) Pension and postretirement benefit Cumulative foreign currency translation adjustment Total
Balance as of June 30, 2022 $ ( 42.7 ) ( 541.2 ) $ ( 583.9 )
Other comprehensive loss before reclassification — ( 139.1 ) ( 139.1 )
Amounts reclassified from AOCI after tax expense of
$ - , $ - and $ - — — —
Other comprehensive loss after tax expense of $ - , $ - and $ - — ( 139.1 ) ( 139.1 )
Balance as of September 30, 2022 $ ( 42.7 ) ( 680.3 ) $ ( 723.0 )
(in millions) Pension and postretirement benefit Cumulative foreign currency translation adjustment Total
Balance as of December 31, 2022 $ ( 64.2 ) ( 584.0 ) $ ( 648.2 )
Other comprehensive loss before reclassification ( 1.1 ) ( 22.1 ) ( 23.2 )
Amounts reclassified from AOCI after tax expense of
$ - , $ - and $ - — — —
Other comprehensive loss after tax expense of $ - , $ - and $ - ( 1.1 ) ( 22.1 ) ( 23.2 )
Balance as of September 30, 2023 $ ( 65.3 ) ( 606.1 ) $ ( 671.4 )
(in millions) Pension and postretirement benefit Cumulative foreign currency translation adjustment Total
Balance as of December 31, 2021 $ ( 42.7 ) ( 352.7 ) $ ( 395.4 )
Other comprehensive loss before reclassification — ( 327.6 ) ( 327.6 )
Amounts reclassified from AOCI after tax expense of
$ - , $ - and $ - — — —
Other comprehensive loss after tax expense of $ - , $ - and $ - — ( 327.6 ) ( 327.6 )
Balance as of September 30, 2022 $ ( 42.7 ) ( 680.3 ) $ ( 723.0 )
For pension and postretirement benefits, we report amounts reclassified from Accumulated other comprehensive income (loss) in Other income within the Condensed Consolidated Statements of Comprehensive Income.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.